Promoting civil society in Third Sector organizations through participatory management patterns

European Management Journal (2010) 28, 403– 412

journal homepage: www.elsevier.com/locate/emj

Promoting civil society in Third Sector organizations through participatory management patterns Benjamin Gidron

*

The Guilford Glazer School of Business, Ben Gurion University of the Negev, Beer-Sheva 84105, Israel

KEYWORDS Unique attributes of NPOs; Societal roles of Third Sector; Organizational subsystems; Participatory management patterns; Civil society

Summary The paper reviews the literature on the unique attributes of non-profit organizations (NPOs) as compared to business and/or public organizations. It shows that this literature is not dealing in detail with the unique organizational attributes of NPOs and proposes ways to do that. It identifies four organizational sub-systems where unique attributes can find their expression: (1) service delivery; (2) governance; (3) participants/ workforce; (4) resourcing. It then links this literature to the literature on the Third/ non-profit Sector and its unique societal roles. The paper suggests that in order for Third Sector organizations to fulfill their unique societal role of contribution to civil society, the structure of their sub- systems and their management patterns should provide opportunities for participatory practices. ª 2010 Elsevier Ltd. All rights reserved.

Introduction The organizational theory literature on non-profit organizations (NPOs) is practically divided: On the one hand we find those who suggest that the structural-organizational imperatives stemming from their legal form, especially the nondistribution of profits and the non-coercive nature of their participation, create a unique organizational entity, dissimilar to either public or business organizations. On the other hand we find those who claim there is a lot of fluidity of organizational forms within the Third Sector; they further suggest that under similar conditions, nonprofit organizations behave similarly to either public or * Tel.: +972 8 647 2323; fax: +972 8 647 7607. E-mail address: [email protected]

business organization, and thus the legal incorporation form tells us very little about their behavior. This issue is related to prevalent conceptions of Third Sector organizations: Are they perceived as belonging to a sector that has unique societal roles, which society recognizes, including specific policies promoting those roles (see: Etzioni, 1973 for an early work on that topic); or are they, because of their heterogeneity, not perceived as belonging to any larger entity (Wagner, 2000) or belonging to several ones (Marshall, 1996). Using that logic one can further state that if they do indeed belong to a unique sector, with unique societal roles – this has to be reflected in unique organizational attributes that they possess. Such attributes should be based on unique predominant values, different from those upheld by business organizations

0263-2373/$ - see front matter ª 2010 Elsevier Ltd. All rights reserved. doi:10.1016/j.emj.2010.06.005

404 (maximizing profits) or public organizations (upholding and protecting the public interest). Thus for example, in the business sector the unique attributes are reflected in the governance structure, dominated by the owners of the organization; also in the funding structure, based on sales, which in turn are based on market dynamics of supply and demand, etc. In the public sector the unique attributes are also reflected in the governance structure, where public organizations are accountable and report to the political entity that founded it (parliament, municipal council) that in turn is elected by the population; also in the funding sources, which are based on taxation of the population that elects the political organ that decides on their allocation. In other words, we claim that there is a relationship between the societal roles of the different sectors, based on the predominant values they uphold and their organizational attributes. Put differently, the values that are at the base of the societal sectors are reflected in the organizational attributes of the entities comprising them. While, as we saw, this is obvious when it comes to comparing business and public organizations, the issue is seldom discussed regarding the Third Sector, probably because there is no agreement regarding the existence of a unique sector and its unique roles. Among those who suggest the Third Sector has unique societal roles, it is agreed that a major one is the promotion of civil society – creating opportunities for non-coerced participation through volunteering, philanthropy and association; promotion of social innovation and change by introducing issues and empowering populations not appropriately represented in other institutions. Such roles are not fulfilled by the other sectors.1 If it is agreed that Third Sector organizations are frameworks where such roles can be fulfilled then these values too, exactly as in the case of the business and public sectors, have to be translated into unique organizational attributes. The paper will first discuss works by three thinkers (Frumkin, 2002; Anheier, 2005; Perrow, 2001) who wrote about the unique organizational attributes of NPOs (as compared to business and public organizations) and their link to the societal roles of the Third Sector. Others wrote about that subject as well (see for example: Goodin, 2003; Eikenberry and Kluver, 2004; Dart, 2004), but the former three works stand out as being broad-based, dealing with a wide array of attributes. Those three works can also be contrasted to the earlier literature on the topic, for example Salamon and Anheier, 1992, where the Third Sector was defined. This literature was primarily legalistic; it distinguished the Third Sector

1 It is important to mention that the early literature on the subject, written mostly by economists, dealt with the raison dÕe ˆtre, the need for a Third Sector in society (i.e. its unique roles). The conceptualizations developed focused primarily on service delivery aspects, specifically services that society needs and are not likely to be provided by the other sectors, because of market-failure (Hansmann, 1980) or government-failure (Weisbrod, 1977). These conceptualizations defined the fields of activity in which non-profit organizations are likely to be found. The social and political roles of the Third Sector and conceptualization regarding its link to civil society were introduced in the second phase of studies on the Third Sector (see: Putnam, 1993, 2000; Foley and Edwards, 1998).

B. Gidron from the other Sectors on the basis of structural properties and did not deal with organizational attributes. In its main part the paper focuses on four attributes, actually organizational sub-systems, which we argue, are important in distinguishing NPOs from other organizational entities and maintaining their unique characteristics. Finally, the paper deals with the implications of upholding these attributes in managing NPOs; we argue that NPO leadership, especially management, has a role in developing those unique attributes that are important not only in the context of managing a specific organization but by way of accentuating the underlying values of the Third Sector in promoting civil society.

Societal roles and unique attributes Frumkin (2002) is one of the leading thinkers to put forth the notion that NPOs have unique attributes. He contends that it is difficult to characterize the specific features of the entire non-profit sector, which includes a diverse set of organizations, but nevertheless he identifies three structural features, which are shared by them all (and not shared by other types of organizations) because of their legal status: ‘‘(1) They do not coerce participation; (2) they operate without distributing profits to stakeholders, and (3) they exist without simple and clear lines of ownership and accountability’’ (p. 3). He goes on to suggest that although such features appear to create a weak set of organizations, actually the contrary is true, and those features enable them to fulfill very important societal functions, both of an instrumental and an expressive nature. The features Frumkin lists are structural rather than organizational; however they can be translated into organizational attributes, as we demonstrate later. Anheier (2005) reviews the literature comparing nonprofit organizations with government agencies and business firms, which is then summarized in a table along twelve parameters: Objective function, outputs, distribution criteria, external orientation, goals, structure, accountability and control, decision-making, participants, motivation, resourcing and size (p. 184). Recognizing the diversity and complexity in the organizational domain and basing himself on the classical work of Max Weber (1947) he refers to the comparison as a one between ideal-types: non-profit, government and business organizations. Not surprisingly he finds differences between the three. But although he admits that along some dimensions there are similarities between non-profits and both public and business organizations, ‘‘(T)hese similarities cut across both sectors and thus prohibit a simple sorting of non-profits into either public or business administration. Both apply partially, but neither fully; and non-profits retain organizational characteristics that are specific to them’’ (pp.182– 183). Thus for example on the issue of ‘‘objectives’’, government is concerned with providing social welfare services on the basis of equity and social justice; business firms pursue the objective of profit maximization, when production is regulated by market supply and demand; non-profits aim to maximize membersÕ or clientsÕ benefits around some value. On the issue of ‘‘resourcing’’ the differences are also apparent: Government agencies receive their financial

Promoting civil society in Third Sector organizations through participatory management patterns resources through taxes, which are obtained by the power of government to coerce; business enterprises use commercial means to finance themselves and they use the market to determine the price; non-profits ideally receive their financial support from philanthropic sources or government allocated funds. On the issue of ‘‘participation’’ non-profits have a voluntary system whereas government has an automatic/coercive one and business – a quasi-voluntary, based on economic needs. On the issue of ‘‘motivation’’ Anheier characterized business organizations as having material motivation, government as purposive and non-profits as solidary, and finally on the ‘‘decision-making’’ dimension he characterized business firms as having a hierarchical system, government as indirectly democratic but directly – hierarchical and in non-profits it is democratic. Perrow (2001) deplores the growth of formal organizational life in society, including non-profit organizations, which he sees, following Putnam (2000) as replacing informal structures. He claims that 20 or 30 years ago it was reasonable to speak about three clearly distinguishable sectors in society, ‘‘today, with the proliferation of organizations and forms, these three types are heavily conflated: Forprofits are taking on functions heretofore reserved to nonprofits; government in the US compete with forprofits in charging for services and goods; and non-profits . . .compete with forprofits . . .and are often renamed spin-offs of downsizing government’’ (p. 33). Yet, he highlights the fact that within the non-profit sector there is a group of ‘‘good nonprofits’’ – the ones that contribute to civil society. Such organizations share the following characteristics: ‘‘A public, collective good is produced, using volunteer labor in substantial amount, with room for social interaction that is not on organizational terms, and below market wages are paid’’ (p. 34). He goes on to operationalize those characteristics, suggesting that a • a public good is one which people outside the organization will benefit from (fighting for clean air, operating a soup kitchen).2 • a substantial volunteer force means roughly 50% of the organizationÕs workforce, which have the option of exiting the organization at any point; • Social interaction not on organizational terms means that members are free to exchange experiences, information and ideas unconstrained by the organizationÕs interests, as human beings, not employees of the organization; • Below market salaries refers mostly to the management levels, suggesting in effect that other types of gratifications apply in the work in such organizations. Perrow then goes on to characterize ‘‘intermediate’’ and ‘‘bad’’ non-profits by the same criteria, which obviously deviate from the standards set for the ‘‘good’’ ones. ‘‘Intermediate’’ he characterizes as those contributing to the public good and are not tax avoidance frameworks, such as cultural institutions (symphony orchestras, muse2 This view of public goods, being produced by citizens, is different from that presented by Samuelson (1954), who sees citizens primarily consuming public (and private) goods under given conditions.

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ums) as well as some foundations that are supporting social causes. Those are staffed by professionals and have only minimal numbers of volunteers (museums more than the other examples), and those also have some opportunities for social interaction, especially amongst members. Also included in this category are ‘‘membership groups’’, where membership only means making a contribution; he suggests that their goals seem collective and their salaries below market levels, but they provide very little room for social interaction amongst members. ‘‘Bad’’ non-profits are characterized as tax avoidance organizations, where the service provided should be provided by for-profit organizations and the profits are distributed to managers and owners in the form of high salaries and perks. Also included in this category are foundations which are practically keeping their assets within the family of the founders. ‘‘Bad’’ non-profits have neither collective goals nor unconstrained social interaction; they pay high salaries, and have no volunteers, so they are ‘‘non-profits’’ in name only. Although Perrow uses normative language (‘‘good’’, ‘‘intermediate’’, ‘‘bad’’), his formulation of non-profits may be considered, indirectly, an attempt to link between the societal functions of this category of organizations (contribution to civil society) and some of their organizational attributes. What he suggests in effect is that organizations that he terms ‘‘intermediate’’ and ‘‘bad’’ are, to different degrees not fulfilling the confidence entrusted in them by the public; they use the legal framework of a non-profit organization but the unique substance emanating from this sector of organizations is not there or is there to a lesser degree. By ‘‘substance’’ he means ‘‘contribution to civil society’’. It is in effect parallel to the ‘‘substance’’ of the business sector (‘‘maximizing profits’’) or the public sector (‘‘protecting and upholding the public interest’’) – the basis, the raison dÕe ˆtre of their existence. This link between societal functions and organizational attributes in NPOs is not only dealt conceptually in the literature but empirically as well. Alexander et al. (1999) propose in their study of welfare agencies in Ohio that an inherent conflict exists between the business-like and marketization strategies some of these agencies adopted in order to meet government contracts, and their ability to promote values of participation. The authors further question the ability of such organizations ‘‘to serve as schools and laboratories of democratic citizenship’’ (p. 453). A similar point is made by Bush (1992) who suggests that a business-like competition-based approach in the non-profit world will undermine its traditions of altruism, compassion and philanthropy and will divert the focus of the organizations from their mission to the way they are managed. Bush compares and contrasts the two orientations of the for-profit and nonprofits worlds and suggests that management of the latter should emphasize cooperation and collaboration rather than conflict and competition, which characterize the former. Perrow tests this ‘‘substance’’ by the existence of organizational attributes such as volunteers in significant proportions, open interaction among participants (noncoerced participation in FrumkinÕs formulation), below market salary levels (expression of non-distribution of profits) and other-oriented nature of their mission. Perrow suggests that these are organizational attributes that can

406 meaningfully contribute to civil society because they provide opportunities to enhance solidarity and to contribute to social capital. He refers to PutnamÕs work. In his earlier book, Putnam (1993) theorizes the relationship between associational experience in society and democracy. The intervening variable, linking voluntary associations to democracy is the concept of social capital and trust, which is built and developed in face-to-face peer-based frameworks. In such associations, which can be church choirs, professional associations or stamp-collection clubs, a person learns to relate to his/her peers, to be tolerant, to make collective decisions, etc. The trust that is developed in those frameworks is then transferred to the political and economic domains. In his later book, Putnam (2000) presents data, and on their basis deplores the decline of face-to-face associational life in the US, which he sees as a threat to democracy. Perrow basically agrees with this thesis; he sees the increase in large non-profit organizations, bureaucratic by nature, as not enabling the development of trust and social capital, which is naturally developed in intimate, volunteer-based, peer-controlled frameworks. Yet it will be erroneous to suggest that social capital can develop only in those intimate face-to-face voluntary frameworks. It can actually develop in almost any organizational framework – business, public or Third Sector. It is a function of the mission of the organization, its structure, its management style and its policies regarding the type of possible relationships between participants. Still, the likelihood of finding it in the business or public sectors is lower, because they have other societal functions that do not necessarily call for developing social bonds between participants that lead to the evolution of social capital. As we know, in certain business organizations competition between workers is encouraged in order to maximize profits; and in public organizations there is often a strong adherence to separation between workers filling different functions or different ranks in the bureaucratic structure. NPOs however, have a higher propensity to engage in developing social capital because of their structural properties emanating from their societal mission. The legitimacy given in democratic societies to the existence of specific frameworks that allow people to associate freely around issues of their choice (in the forms of constitutional rights of association and laws regulating activities of Third Sector organizations), sends a message that society is interested in active citizens, involved and engaged with each other, using their creativity and imagination in the development of their communities. This is the gist of civil society. Thus, in addition to providing specific types of services, as we learned from the economic theories, the other Third SectorÕs unique societal role is the development of civil society. While the first role defines the issues around which organizations will develop (day-care services, rehabilitation centers for the handicapped, avant-garde theater, etc.), the second has to do with the organizational orientation and internal dynamics. In other words, the societal mission in a democracy of encouraging active citizenship cannot be fulfilled by legal means; it needs to be fulfilled through organizational structure, policies and management styles. This, as Perrow shows so eloquently, is not always the case in many NPOs. But on the other hand, the fact that social capital is not produced in a specific organization at a certain

B. Gidron point in time, does not mean it cannot or should not be produced. It is the thesis of the paper that such situations are reversible and they depend on the organizationÕs policy and management practices. The potential societal asset of active citizenship needs to be translated into a policy of active participation by members, workers and other stake-holders in the management of the individual NPO. Obviously, such practices have to be integrated with the mission and goals of the individual organization on the one hand (e.g. rehabilitation of the handicapped, furthering music education in the community or protecting the environment) and with its need to survive in the political economy of its environment on the other. In summary, NPOs, more than other types of organizations, are in a position to develop civil society, yet many of them do not necessarily do so. The difference between those that do and those that donÕt often depend on managerial practices and choices the leadership of the organization makes, as is shown below. In other words, unlike Perrow, who categorizes NPOs into ‘‘good’’ ‘‘intermediate’’ and ‘‘bad’’, we claim that NPOs can control, at least to an extent, their propensity to contribute to civil society. They can do so by choosing to engage in participatory practices, namely, practices that are purposefully intended to involve and engage as many of the participants and stake-holders as possible along a variety of the organizationÕs sub-systems. Obviously, there is no blueprint for such an approach and each organization has to choose the sub-systems in which it can and wants to engage in such practices and the forms to do so. Furthermore, organizations and conditions around them change over time and so are participatory practices. Thus, there is a need for a value-based commitment to it, not a formula for specific practices. Such a commitment ensures a dynamic approach: New patterns of participatory practices will be developed under different conditions.

Four organizational sub-systems What we propose is to analyze four organizational subsystems within non-profit organizations, namely: (1) The service delivery system3; (2) The governance system; (3) The participants/workforce system; (4) The resourcing system. We claim that these are key sub-systems in organizations (see: Kenny-Stevens, 2001), where participatory practices can readily find expression. The first one has to do with the way the service is structured, which informs about the organizationÕs orientation and its claim for its specific contribution to society. The other three sub-systems have to do with the form of management chosen for the organization. The legal status of an NPO gives its leadership many options regarding the structure of those sub-systems. For example, they can, but do not have to integrate volunteers in their work. The way these sub-systems are structured, especially regarding patterns of participation of

3 Obviously Third Sector organizations do not only provide services – some are engaged in advocacy, others in funding (philanthropic foundations). Yet these latter functions are unique to organizations in the Third Sector, whereas service delivery is also found in the business and public sector; thus when unique attributes are discussed they have to be compared to other similar entities.

Promoting civil society in Third Sector organizations through participatory management patterns members/participants/stake-holders create the conditions to develop social capital and indirectly contribute to civil society. Furthermore, engaging in participatory practices within one of those sub-systems is likely to spill over to the others. Thus for example if the organization increases its volunteer workforce, it is likely to create pressure on the governance system to provide an appropriate expression for their representation on the board. Obviously these sub-systems are dynamic and change over time in light of changes in the organizationÕs environment. Some organizational theories, resource dependency and institutional theories in particular, suggest that political economy is at the base of changes organizations experience. Changes in the environment will force organizations to adapt to new realities, and pressures stemming from these changes override any good intentions organizations may have to preserve existing practices. Contracting with government for example will often call for the replacement of volunteers by paid professionals. Yet, given the domain of civil society, it is important to add the value-base of many of the decisions taken by such organizations. Thus, if certain organizational practices are important to uphold (e.g. work with volunteers) – organizational solutions will be found in order to protect this asset even if pressure in the opposite direction is mounted. In other words, the idea that with growth and development organizations are bound to lose their uniqueness as Third Sector organizations is called into question. Followed is a list of the four sub-systems and policies/ practices around each, which stress and encourage the value of participation. Organizations which maintain a unique and distinguished non-profit identity will rarely meet all the conditions listed, but they will attempt to meet many of those.

The service delivery system • Initiation: The service is based on a public unmet need or problem identified by a citizen or group of citizens who form an association to deal with it. • Niche: In comparison to other services provided by other organizations in the same domain, the service represents a niche. When others will move into that niche, the organization will change its mission to accommodate to the new reality or disband. • Ideological message: The service often has an underlying ideological message and the form of delivery reflects it. • Service and Advocacy: The service is often accompanied by advocacy of the population served.

The governance system • Multiple Stake-Holders: The governance system reflects the fact that the NPO has several and diverse stakeholders and the NPO finds ways to represent those in the board of directors and the decision-making processes. • Board Practices: The board practices involve board members and members-at-large in meaningful ways in the decision-making processes of the organization through a committee structure and other opportunities for fruitful exchanges between staff, board and members of the organization.

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• Rotation: The board practices include a rotation system of office holders

The participants/workforce system • Volunteers: The organization involves volunteer workers in many of its activities. Volunteers fill a variety of positions, including positions of responsibility and representation of the organization. • Levels of Salaries in Comparison to the Market: The ongoing salaries of employees do not exceed the standards in the particular field of activity common in the public sector, yet the organization carries benefits (pensions, health insurance, etc.) for its employees. • Levels of Salaries within the Organization: The difference between the highest and the lowest paid employee does not exceed a reasonable proportion.

The resourcing system • Multiple Funding Sources: The organization strives to have many types of funding sources. If possible its income structure reflects funding from public, philanthropic and self-generated sources. Plurality of funding sources demonstrates that the organization is important to many individuals and entities. It also creates a situation whereby the organization is not dependent on one source and therefore can pursue its policies with a higher degree of independence. • Philanthropic Donations from the Public and Board Members: Among the different philanthropic funding sources (big donors, foundations) a most important source are small donations from the public, which sends the message the organization and its mission is important for a lot of people; it is also an important form of public/ community participation. Board members are expected to donate to the organization as well, stressing their identification with the organization and its mission.

Participatory practices The service delivery system How non-profit organizations are initiated, how do they choose and formulate their mission, and how is this different from public and business organizations? While in all three instances the basis for a new organization with a specific mission is some kind of need, the dynamics regarding the establishment and the definition of the mission is totally different. In the case of a business organization the need (for a specific service) is backed by the existence of a market with customers or potential customers for that service. In the case of a public organization, the need is translated into political expression before budgets are allocated to fund it. In the case of the Third Sector the need or problem is identified on its own ‘‘merit’’, without being linked to economic or political preconditions. It is usually identified by an entrepreneur, who engages in a campaign to convince potential users of the service, funders, supporters and others of the merits of the new enterprise and is trying to secure the support needed to operate it.

408 Non-profit organizations evolve around a population that has specific unmet needs (e.g. cultural needs of an immigrant group) or around a new form or method to help or empower a specific population (e.g. the ‘‘Peto’’ method of treatment for children and adolescents with severe motor limitations deriving from cerebral palsy) or a public issue (e.g. clean air). Once the organization is established it tends to define its service delivery system in unique, niche-like terms as compared to others delivering similar services. Very often such a service is accompanied by an ideological statement. Thus for example, a non-profit shelter for battered women is not only providing immediate services to women and their children, but the treatment is accompanied by a feminist message of womenÕs rights and empowerment, messages they are unlikely to receive in a public agency providing services to the same population. Or an organization of parents of mentally ill children is not only engaged in helping its members to better cope with their predicament, but it also rejects treatment modes that indirectly blame the family for their childÕs illness; instead they support the notion that schizophrenia is an illness similar to tuberculosis or cancer and the stigma attached to the family as causing the childÕs illness is unjustified. The service is also often accompanied by an advocacy effort that complements its delivery. Service delivery NPOs understand that if they want to help the population served, they should try and change the conditions that brought about that populationÕs predicament. This often includes changes in laws, regulations and policies. This starts when the organizationÕs leadership realizes the need for an advocacy effort in addition to the service provided. It can also start from the other end, when an advocacy organization realizes that it needs to add a service component to its mission. Engaging in advocacy in addition to the service delivery is strictly a feature of the Third Sector; for obvious reasons it is not found in business or public organizations, which may be delivering similar services. If the organization is successful in its endeavor and its message is ‘‘picked up’’ by either the public sector, which decides to adopt it in light of political pressure to do so, or the business sector, because a market has developed around that service, the NPO has a major problem: It can continue to provide services it has provided in the past but will find itself in competition with business/public agencies and will have growing difficulties convincing its supporters of its necessity and its unique contribution. In such a case it can try to define a new niche within the domain of its activity. This has happened in the famous case of the ‘‘March of Dimes’’, which collected funds to research polio; when the polio vaccine was developed the organization found it no longer had an appropriate mission; it modified its mission to the treatment of children with polio and thus maintained its organizational assets. Thus, as government failure theory suggests (Weisbrod, 1998), NPOsÕ missions and service delivery systems need to be within specific niches, not covered by other types of organizations and they constantly need to be ‘‘on their toes’’ to make sure this status is maintained. When it comes to advocacy organizations the situation is not very different. They too need a mission that is pertinent, not taken by another NPO, and if the issue around which they organized is resolved, theyÕll have a lot of diffi-

B. Gidron culty justifying their existence. Some simply disband. A case in point is an organization entitled ‘‘Four Mothers’’, which was advocating the withdrawal of Israeli troops from Lebanon. When this occurred (in 2004) there was no more need for the organization and it disbanded. Obviously such dramatic ending of an organization whose mission was accomplished is rare, especially when organizations fighting for human rights or for a cleaner environment are involved, whose work is cut out for them for decades. But they too need to adjust their missions and goals according to changes around them to which they cannot become indifferent. The participatory aspects of this dimension is embodied in the fact that NPOs are sensitive to community needs, and engage in activities around issues not dealt with (or not dealt with appropriately) by other entities. They do so without any preconditions such as the existence of markets or the existence of political clout around the issue. Furthermore, dealing with an unmet community need often requires the organization to engage in both service delivery and advocacy, which NPOs are obviously set for. Minkoff (2002) argues that such hybrid forms are especially important for identity-based organizations (women, minorities) as they better advance their cause. She argues that ‘‘hybrid forms of organization, by expanding the resource infrastructure and legitimacy available to identity-based organizations, play a critical role in anchoring the continued viability of identity-based service organizations under newly politicized conditions’’ (p. 378).

Governance NPOs have a wide range of options regarding their governing structure: The board of directors can be a small group of friends and acquaintances of the founder – as is initially the case among many NPOs, which can with time develop into a more elaborate one, representing the different stake-holders of the organization. As the NPO grows and develops and its mission becomes important, it will have more stake-holders – individuals and organizations in its environment which are affected by what it does or are in a position to affect it, and therefore have an opinion about the direction it takes. In addition to the actual membership of the NPO, these stake-holders include (not in any order of importance) the different funders, the consumers of its services, the immediate community where the organization is located, the local and sometimes the national government, organizations complementing the service the NPO is providing or those the NPO is complementing their service, representatives of the main profession around which the service provided evolves, etc. As the issue of ‘‘ownership’’ of the NPO is fuzzy and unclear, each of those has a legitimate claim regarding the need to take its unique perspective into consideration when policies or other key decisions are made by the NPO leadership. An organizational governance system that stresses participation makes an effort to include as many of those as possible (and feasible) to create a broad base on which decisions are made and to ensure that decisions reflect the interests of as many stake-holders as possible. Eventually, as the organization finds its stable existence, the issue of representation of the different stake-holders is

Promoting civil society in Third Sector organizations through participatory management patterns often formalized in the by-laws regarding election of new board members and replacing old ones. As is suggested by Cornforth (2003) the actual composition of the board and the types of relationships it forms with the CEO reflect very often divergent interests and goals on the part of those two entities, and these in turn reflect certain theoretical (and ideological) perspectives. He lists six such perspectives, one of them being a democratic perspective, which has as its goal a broad lay participation of the organizationÕs constituency as opposed for example to an expert-dominance. Such a structure of the board reflects a value-base that obviously stresses broad participation. Involvement of stake-holders in decision-making processes entails not only board membership but also a committee system. Such a structure provides an opportunity to involve non-board members in decision-making processes. Involvement of non-board members in board committees is a practice also used as a way to interest and recruit future leadership of the NPO. Participatory practices also include retreats, which the board and staff take periodically to discuss future directions of the NPO. These serve as opportunities for informal social interaction between those involved that can lead to better understanding of the differing points of view reflected at deliberations. When key decisions are needed regarding major changes in future directions of the NPO, such as changes or modifications of goals, the larger constituency of the NPO (membership, clients, others) is involved as well. Board practices that reflect the notion of participation, stress the idea that the NPO does not ‘‘belong’’ to one person or to one type of stake-holders. Membership in the board is for a specific and limited period of time and so is the period for office holders. While a rotation system is in place, the NPO finds ways to preserve its organizational learned experience by involving retired board members in its work. Board meetings and agenda setting practices reflect a democratic framework, whereby issues can be raised by any board member and most matters4 can be discussed openly.

Multiple funding sources Unlike business or public organizations, which draw their funding resources from one source (sales and taxes respectively), NPOs have the option to draw on three types of funders – public sources, philanthropic sources and selfgenerated income. Each of those sources is further subdivided. Thus for example public sources can come from local or central government, they can be in the form of grants and contracts. Philanthropic sources can be large donations by a few donors or small donations from a large number of donors as well as grants from foundations. Selfgenerated income can be membership fees, interest on an endowment the organization has, property that is rented, a business venture that it runs as a subsidiary or fees for services it provides. Legally NPOs are not constrained to use all of those or to draw on them in certain proportions, and indeed different 4 Excluding those pertaining to personal issues and confidential professional matters.

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NPOs, based on their mission and position find the right mix of resources that they can possibly draw on. Thus for example, an advocacy organization will not be able (nor will it want to) receive funding from the public sector, which it pressures to change or modify its policies; or an organization that has no members cannot draw funds from membership fees. Furthermore, sometimes, certain funding sources will not be forthcoming if the organization is funded from a specific (alternative) source, which means that in such cases the organization has to choose between funders, and usually ideological orientations. As Eikenberry and Kluver (2004) demonstrate, the choices of the funding sources may seriously impact the organizationÕs ability to contribute to civil society. They focus on the relationship between marketization trends within the Third Sector (e.g. commercial revenue generation, contract competition, the influence of new and emerging donors, and social entrepreneurship) and the ability of those organizations to provide services in a unique way and to engage in advocacy, to serve as value guardians and to generate social capital. Guo (2006) also found a relationship between commercial sources of funding and the organizationÕs ability to attract volunteers and donors and for those to impact on the mission and the service delivery system. Given its structural constraints, every NPO can find ways to diversify its financial resources and attempt to include additional ones. Diversification of funding sources is important for the positioning of the organization in society, as it demonstrates the multiplicity of interests in its work and in its contribution. Apparently it is also important in terms of the organizationÕs stability (see: Chang and Tuckman, 1994). Public sector funding represents the public interest, stake, involvement and support of the organizationÕs mission. It also serves as a form of legitimacy for certain types of organizations, which then can appeal to other sources, based on the public sectorÕs support. The public funding is usually in the form of grants or contracts. Each form calls for a different type of relationship between the granting agency and the NPO and a different level of public scrutiny and supervision of the organizationÕs work. Organizations which receive government contracts have on the one hand a stable funding source, usually for a multi-year basis; on the other hand they risk losing their NPO identity, especially if this is the only or even the major source of funding, as the pressure on them to conform and behave like a public agency will be substantial. Donations also represent a public interest in the organization, although not necessarily by the entire public, but rather by a specific faction in the population that believes the mission of the organization is worth supporting. That support can be limited in time, until the organization is able to prove its importance and gain support from other sources. It can also be permanent as the organization deals with an issue that is important to a faction of the population that values it and will not likely to attract other funding sources. The NPO has to identify that faction, which sometimes can be significant. A case in point is the Cancer Society, which attracts donations from a sizable portion of the public. As cancer is an issue that everyone is familiar with and afraid of – the organization has a broad potential donor-base. Donations are also related to the charity tradition of the Third Sector, with

410 very strong religious roots. Depending on the mission of the organization, this is a strong motivational force to attract donors. NPOs usually divide donations into large gifts by a small number of donors, small sums from a large number of donors or grants from foundations. Each of those categories calls for a different form of relationship between the organization and its funders. Both large donors and foundations with substantial grants, usually want to have a degree of control over the organization, at least as it pertains to the usage of their own grant. This may sometimes mean changing the NPOÕs priorities. This may aid the NPO if it has the same intentions. In other cases it may represent a strategic dilemma. This is not the case with small donations from the public, which represent many individuals with many opinions. The latter is an important component in the overall funding frame, as it demonstrates the publicÕs support for the mission of the organization and its participation in upholding it. Thus, an organization with a participatory orientation makes a particular effort to attract such funding, even if it is more difficult to obtain than other forms of donations. Earned income is again sub-divided into different subcategories. On the one hand there are the clientsÕ/membersÕ payments in the form of membership fees or payments for service. On the other hand there are business ventures the NPO undertakes in the form of renting its premises, partnering with a business organization or opening a business subsidiary. The former methods conceptually reflect the economic value users of the organizationÕs services are willing or able to pay for. It is another indicator of the NPOÕs service ‘‘worth’’. With payment for service, the higher the rate of the organizationÕs budget taken by this component the more the organization will resemble and behave like a business organization: Treating its users as customers not clients, with considerations of market value of the service in light of competition becoming those that receive major focus. A case in point is a theater or symphony orchestra, which needs to satisfy the publicÕs traditional taste rather than engage in experimental programming when its public funding decreases and its budget is taken up by sales of tickets in a larger proportion. This is true also when the NPO has a partnership with a business organization, or even when the NPO has a business enterprise, which is closely related to its mission, when there is a danger that business considerations will predominate the way the organization thinks about issues as reported by Cooney (2006). A participatory approach in managing this sub-system will include self-generated income in the organizationÕs budget (when possible) but leaving it at a rate that will not put into question the organizationÕs mission.

The participants/workforce system The existence of volunteers is yet another reflection of the importance of the organizationÕs mission to the community and the willingness of individuals to lend a hand in its support. This is an important asset for the organization, not only in the instrumental sense (additional personnel resources) but also as a source of public support such as when

B. Gidron the organization finds itself in a political controversy or when public funds are threatened to be withdrawn from it (Pearce, 1993). Similar to donors, volunteers can be contributing very little or a lot of their time; they can be skilled or unskilled; they can be holding responsible, complex or simple jobs within the organization. An NPO that values the involvement of volunteers will find ways to offer them a large number of options of volunteer jobs so as to attract and accommodate different types of people to the organization and to create conditions for them to contribute to it on a sustained basis. This requires the NPO to plan an appropriate infrastructure for volunteer involvement, which includes preparing the paid staff to work with volunteers, engage in a recruitment campaign, selection process, training and supervision and providing appreciation and thanks. In addition to the involvement and integration of volunteers in its workforce, NPOs with a participatory orientation will design a compensation system that is appropriate to the overall mission of the organization. Given its public and community orientation, it is inappropriate that an NPOÕs compensation structure will resemble that of a business organization. This is a very sensitive issue and is closely related to the public image of Third Sector organizations. Employees working in NPOs often realize that, and expect other types of compensations from their work, such as contributing to the public good. (On the structure of employeesÕ compensation in the non-profit sector see for example: Jobome, 2006; Hallock, 2002) Jegers (2008) quotes several sources that studied and compared managersÕ salaries in non-profit and for-profit organizations within the same industries and found the former to be lower. He suggests that ‘‘there is some consensus that they are at least partially motivated or characterized by a form of altruism’’ (45). Leete (2006) reviewed the literature on wage equity across sectors and found more such equity among non-profit as opposed to for-profit organizations. Furthermore, her findings were strongest among white-collar executives and managerial employees. She suggests that ‘‘(T)his fact is consistent with the theoretical expectation that differences in motivational requirements among different types of organizations are most significant at the managerial and whitecollar level’’ (164–165). The level of salaries paid to employees in NPOs has both an external and internal dimension. The external has to do with comparison of the levels of salaries paid to other organizations in the same practice area in the different sectors; the internal has to do with the salary differentials within the organization. An organization in the Third Sector cannot afford to be labeled as using cheap labor and exploiting its workers; thus a certain reasonable proportion should be maintained between the highest and lowest paid employee.

Discussion and conclusion The paper makes the argument that there is a relationship between the unique societal roles of the different sectors and their organizational attributes and characteristics. While this is quite obvious in the public and business

Promoting civil society in Third Sector organizations through participatory management patterns sectors where for example both governance and resourcing systems reflect the nature of the particular sector, this is not so obvious in the Third/non-profit Sector, where the societal role is not yet formulated and agreed upon. The paper then reviews the literature on the unique attributes of NPOs as compared to business and/or public organizations. It identifies one source (Perrow, 2001) that is linking the unique organizational attributes of NPOs to their societal role of developing civil society. The paper develops that argument and shows that organizational structure, policy and management style that are committed to participatory practices, can create conditions whereby social capital is developed, which contributes to civil society. It then identifies four organizational sub-systems where such practices can find their expression: (1) service delivery; (2) governance; (3) participants/workforce; (4) resourcing. In each of those, specific participatory practices are discussed in detail. The main argument of the paper – that organizations that promote participatory practices contribute to civil society more than those which donÕt – needs empirical proof. This calls for studies comparing NPOs that engage in participatory practices to those that donÕt. A related question in such studies would be: Given that it is practically impossible to engage in participatory practices along all sub-systems, which of the four (or combination thereof) would be more important than others in their contribution to civil society. Another question the paper raises has to do with the time dimension. Obviously organizations change over time; if they started out with participatory practices, or if they did not start with those – it does not mean they are doomed to engage in the same practice forever. There are circumstances, opportunities or limitations that will compel an organization to change its orientation towards its managerial practices. The scheme presented in the paper should be taken to a next phase, where the question should focus on how to initiate and engage in participatory practices at different stages of development of organizations (see: Kenny-Stevens, 2001; Anheier, 2005; 148–152; Helmig et al., 2010; 1118–1120). A third question regards the undercurrent idea presented in this paper that NPOs should contribute to civil society. Obviously there are important NPOs whose mission does not enable them to engage in participatory practices – certain professional organizations providing specialized treatment come to mind, also organizations established by government in order to fulfill a certain task. Such organizations may be very successful in filling the functions they were set to fulfill without engaging in participatory practices. The issue here is one of degree. It seems that such organizations, if they are part of the Third Sector can continue to be very successful in their specific mission while engaging in participatory practices in some of their subsystems.

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B. Gidron BENJAMIN GIDRON is a Professor of Nonprofit Organizations Management at the Guilford Glazer School of Management in Ben Gurion University of the Negev in Israel. He was also the Founding Director of the Israeli Center for Third Sector Research (ICTR) and the Founding President of the International Society for Third Sector Research (ISTR).